G.R. No. 175949
UNITED ALLOY PHILIPINES CORPORATION, SPOUSES DAVID C. CHUA and LUTEN
CHUA, Petitioners
vs.
UNITED COCONUT PLANTERS BANK, Respondent.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking the reversal and setting
aside of the Decision 1 and Resolution2 of the Court of Appeals (CA), dated September
21, 2006 and December 11, 2006, respectively, in CA-G.R. CV No. 81079. The assailed
Decision affirmed the Decision of the Regional Trial Court (RTC) of Makati City, Branch
135, in Civil Case No. 01-1332, while the questioned Resolution denied petitioners'
Motion for Reconsideration.
The pertinent factual and procedural antecedents of the case are as follows:
On December 18, 2000, herein petitioner corporation, United Alloy Philippines
Corporation (UNIALLOY) applied for and was granted a credit accommodation by herein
respondent United Coconut Planters Bank
(UCPB) in the amount of PhP50,000,000.00, as evidenced by a Credit Agreement. 3 Part
of UNIALLOY's obligation under the Credit Agreement was secured by a Surety
Agreement,4 dated December 18, 2000, executed by UNIALLOY Chairman, Jakob Van Der
Sluis (Van Der Sluis), UNIALLOY President, David Chua and his spouse, Luten Chua
(Spouses Chua), and one Yang Kim Eng (Yang). Six (6) Promissory Notes,5 were later
executed by UNIALLOY in UCPB's favor, to wit:
1) #8111-00-20031-1, executed on December 18, 2000, in the amount ofUS$110,000.00;
2) #8111-00-00110-6, executed on December 18, 2000, in the amount of
PhP6,000,000.00;
3) #8111-00-00112-2, executed on December 27, 2000, in the amount of
PhP3,900,000.00;
4) #8111-01-20005-6, executed on February 7, 2001, in the amount of US$320,000.00;
5) #8111-01-00009-0, executed on February 26, 2001, in the amount of PhPl,600,000.00;
6) #8111-01-00030-8, executed on April 30, 2001, in the amount of PhP16,029,320.88.
In addition, as part of the consideration for the credit accommodation, UNIALLOY and
UCPB also entered into a "lease-purchase" contract wherein the former assured the
latter that it will purchase several real properties which UCPB co-owns with the
Development Bank of the Philippines.
Subsequently, UNIALLOY failed to pay its loan obligations. As a result, UCPB filed against
UNIALLOY, the spouses Chua, Yang and Van Der Sluis an action for Sum of Money with
Prayer for Preliminary Attachment6 on August 27, 2001. The collection case was filed
with the Regional Trial Court of Makati City (RTC of Makati) and docketed as Civil Case
No. 01-1332. Consequently, UCPB also unilaterally rescinded its leasepurchase contract
with UNIALLOY.
On the other hand, on even date, UNIALLOY filed against UCPB, UCPB Vice-President
Robert Chua and Van Der Sluis a complaint for Annulment and/or Reformation of
Contract with Damages, with Prayer for a Writ of Preliminary Injunction or Temporary
Restraining Order.7 Claiming that it holds office and conducts its business operations in
Tagoloan, Misamis Oriental, UNIALLOY filed the case with the Regional Trial Court of
Cagayan De Oro City (RTC of CDO) and was docketed as Civil Case No. 2001-219.
UNIALLOY contended that Van Der Sluis, in cahoots with UCPB Vice-President Robert
Chua, committed fraud, manipulation and misrepresentation to obtain the subject loan
for their own benefit. UNIALLOY prayed, among others, that three (3) of the six (6)
Promissory Notes it executed be annulled or reformed or that it be released from
liability thereon.
On September 12, 2001, UNIALLOY filed an Urgent Motion to Dismiss8 the collection
case (Civil Case No. 01-1332) filed by UCPB on the ground of litis pendentia and forum
shopping. UNIALLOY contended that its complaint for annulment of contract (Civil Case
No. 2001-219) and the collection case filed by UCPB involves the same parties and
causes of action. On October 31, 2001, the RTC of Makati issued an Order9 denying
UNIALLOY's motion to dismiss.
In the meantime, UCPB and its co-defendants also filed a Motion to Dismiss UNIALLOY's
complaint for annulment of contract on the grounds of improper venue, forum
shopping, litis pendentia, and harassment or nuisance suit. On September 13, 2001, the
RTC of CDO issued an Order10 dismissing UNIALLOY's complaint for annulment of
contract. The dispositive portion of the Order reads, thus:
ACCORDINGLY, finding meritorious that the venue is improperly laid and the
complain[ant] engaged in forum-shopping and harassment of defendant Jakob Van Der
Sluis, this case is hereby DISMISSED rendering the prayer for issuance of a writ of
preliminary injunction moot and academic, and ordering plaintiff to turn over possession
of the subject premises of the properties in question at Barangay Gracia, Tagoloan,
Misamis Oriental to defendant United Coconut Planters Bank.
SO ORDERED. 11
Thereafter, on motion, the RTC of CDO issued an Order of Execution, dated September
14, 2001, directing UNIALLOY to tum over to UCPB the property subject of their lease-
purchase agreement.
UNIALLOY then filed a petition for certiorari and mandamus with the CA questioning the
September 13 and September 14, 2001 Orders of the RTC of CDO. UNIALLOY also prayed
for the issuance of a writ of preliminary injunction. The case was docketed as CA G.R. SP.
No. 67079.
On February 18, 2002, the CA promulgated a Resolution 12 granting UNIALLOY's prayer
for the issuance of a writ of preliminary injunction. UCPB questioned the above CA
Resolution by filing a petition for certiorari with this Court, which was docketed as G.R.
No. 152238. On March 18, 2002, this Court issued a Resolution which restrained the CA
from enforcing its February 18, 2002 Resolution.
court on the ground of pendency of the certiorari petition it filed with this
Court.13 However, the RTC denied UNIALLOY's motion in its Order14 dated August 19,
2002.
Subsequently, on June 17, 2003, the RTC of Makati rendered Judgment in the collection
case in favor of UCPB. The dispositive portion of the RTC Decision reads, thus:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff.
Defendants are hereby ordered to pay plaintiff the following:
a. The sum of US DOLLARS: (US$435,494.44) with interest and penalty charges from
August 1, 2001 until fully paid.
b. The sum of ₱26,940,950.80 with interest and penalty charges from August 1, 2001
until fully paid.
c. Attorney's fees in the amount of ₱1,000,000.00.
d. Costs of suit.

On January 28, 2005, this Court, rendered its Decision in G.R. No. 152238 denying
SO ORDERED. 15
UCPB's petition for certiorari and affirming the CA Resolution granting the writ of
preliminary injunction.
UNIALLOY appealed the above RTC Decision with the CA.
Thereafter, on August 17, 2007, the CA promulgated a Decision dismissing
UNIALLOY's certiorari petition and affirming the September 13 and September 14, 2001 On September 21, 2006, the CA rendered its assailed judgment denying UNIALLOY's
Orders of the RTC of CDO. UNIALLOY then filed a petition for review appeal and affirming the questioned RTC Decision.
on certiorari challenging the above CA Decision. The case was docketed as G.R. No.
179257. Hence, the instant petition raising the following issues:

On November 23, 2015, this Court promulgated a Decision in G.R. No. 179257 denying 5.01 THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS, REVERSIBLE ERROR,
UNIALLOY's petition. This Court held that the CA did not err in affirming the dismissal of IF NOT GRAVE ABUSE OF
UNIALLOY's complaint on the grounds of improper venue, forum shopping and for being
a harassment suit. This Court also ruled that the August 17, 2007 Decision of the CA DISCRETION, IN REFUSING TO RESOLVE AS TO -
neither violated this Comi's January 28, 2005 Decision in G.R. No. 152238 nor
contradicted the CA's February 18, 2002 Resolution granting the preliminary injunction I
prayed for by UNIALLOY because the dismissal of UNIALLOY's main action carried with it
the dissolution of any ancillary relief previously granted in the said case, such as the
WHETHER OR NOT THE TRIAL COURT ERRED IN DENYING PETITIONERS' URGENT
abovementioned preliminary injunction. Subsequently, this Court's Decision in G.R. No.
MOTION TO DISMISS
179257 became final and executory per Entry of Judgment dated January 20, 2016.

II
Meanwhile, on March 15, 2002, UNIALLOY filed with the RTC of Makati an omnibus
motion praying for the suspension of the proceedings of the collection case in the said
WHETHER OR NOT THE TRIAL COURT ERRED IN DENYING PETITIONERS' OMNIBUS
MOTION TO SUSPEND PROCEEDINGS AND TO LIFT WRIT OF PRELIMINARY ATTACHMENT
III
WHETHER OR NOT THE TRIAL COURT ERRED AND/OR COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RENDERING THE
ASSAILED QUESTIONED DECISION WHEN THERE IS A PENDING CIVIL ACTION BEFORE THE
REGIONAL TRIAL COURT OF CAGAYAN DE ORO, BRANCH 40, INVOLVING THE SAME
PARTIES AND SUBJECT MATTER WHICH CASE, IS NOW PENDING AND ASSAILED BY THE
PLAINTIFF-APPELLEE VIA PETITION BEFORE THE HONORABLE SUPREME COURT.
5.02 THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS, REVERSIBLE ERROR
IF NOT GRAVE ABUSE OF DISCRETION, IN DENYING PETITIONERS' URGENT MOTION FOR
RECONSIDERATION WITHOUT STATING CLEARLY AND DISTINCTLY THE FACTUAL AND
LEGAL BASIS THEREOF.16
Petitioners' basic argument is that the resolution of the instant petition basically hinges
on the outcome of the petition filed under G.R. No. 179257. Considering that the
promissory notes subject of G.R. No. 179257 are among the promissory notes which are
also involved in the present case, petitioner contends that a judgment by this Court in
G.R. No. 179257 that reverses the Decision of the RTC of Cagayan de Oro City, which in
effect would declare the nullity of the subject promissory notes, may conflict with the
Decision of this Court in the present petition, which involves the collection of the sum
being represented in the same promissory notes. Thus, petitioner prays for the dismissal
of the collection case (Civil Case No. 01- 1332) filed by UCPB or the suspension of
proceedings therein pending resolution of its petition in G.R. No. 179257.
However, as mentioned above, on November 23, 2015, the 2nd Division of this Court
already came up with a Decision in G.R. No. 179257 which affirmed the RTC's dismissal
of UNIALLOY's complaint. Pe1iinent portions of the said Decision read as follows:
CA CDO did not err in affirming the
dismissal of UniAlloy's Complaint on the
grounds of improper venue, forum shopping
and for being a harassment suit
The RTC was correct in dismissing UniAlloy's Complaint on the ground of improper
venue. In general, personal actions must be commenced and tried (i) where the plaintiff
or any of the principal plaintiffs resides, (ii) where the defendant or any of the principal
defendants resides, or (III) in the case of a resident defendant where he may be found,
at the election of the plaintiff. Nevertheless, the parties may agree in writing to limit the
venue of future actions between them to a specified place.
In the case at bench, paragraph 18 of the LPA expressly provides that "[a]ny legal action
arising out of or in connection with this Agreement shall be brought exclusively in the
proper courts of Makati City, Metro Manila." Hence, UniAlloy should have filed its
complaint before the RTC of Makati City, and not with the RTC of Cagayan de Oro City.
But to justify its choice of venue, UniAlloy insists that the subject matter of its Complaint
in Civil Case No. 2001-219 is not the LPA, but the fictitious loans that purportedly
matured on April 17, 2001.
UniAlloy's insistence lacks merit. Its Complaint unequivocally sought to declare "as null
and void the unilateral rescission made by defendant UCPB of its subsisting Lease
Purchase Agreement with [UniAlloy]." What UCPB unilaterally rescinded is the LPA and
without it there can be no unilateral rescission to speak of. Hence, the LPA is the subject
matter or at least one of the subject matters of the Complaint. Moreover, and to
paraphrase the aforecited paragraph 18 of the LPA, as long as the controversy arises out
of or is connected therewith, any legal action should be filed exclusively before the
proper courts of Makati City. Thus, even assuming that the LPA is not the main subject
matter, considering that what is being sought to be annulled is an act connected and
inseparably related thereto, the Complaint should have been filed before the proper
courts in Makati City.
With regard forum-shopping, our review of the records of this case revealed that
UniAlloy did not disclose in the Verification/Certification of the Complaint the pendency
of Civil Case No. 2001-156 entitled "Ernesto Paraiso and United Alloy Philippines
Corporation v. Jakob Van Der Sluis." The trial court took judicial notice of its pendency as
said case is also assigned and pending before it. Thus, we adopt the following
unrebutted finding of the RTC:
These two civil cases have identical causes of action or issues against defendant Jakob
Van Der Sluis for having misrepresented to plaintiff and its stockholders that he can
extend financial assistance in running the operation of the corporation, such that on
April 6, 2001 plaintiff adopted a Stockholders Resolution making defendant Jakob
chairman of the corporation for having the financial capability to provide the financial
needs of plaintiff and willing to finance the operational needs thereof; that a
Memorandum of Agreement was subsequently entered between the parties whereby
defendant Jakob obligated to provide sufficient financial loan to plaintiff to make it
profitable; that Jakob malicious! y and willfiilly reneged [on] his financial commitments
to plaintiff prompting the stockholders to call his attention and warned him of avoiding
the said agreement; that defendant who had then complete control of plaintiffs bank
account with defendant UCPB, through fraudulent machinations and manipulations, was
able to maliciously convince David C. Chua to pre-sign several checks; that defendant
Jakob facilitated several huge loans purportedly obtained by plaintiff which defendant
himself could not even account and did not even pay the debts of the corporation but
instead abused and maliciously manipulated plaintiffs account. Forum-shopping indeed
exists in this case, for both actions involve the same transactions and same essential
facts and circumstances as well as identical causes of action, subject matter and issues, x
xx
As mentioned above, this Court's Decision in the above case has become final and
executory on January 20, 2016.
Thus, contrary to petitioners' position, there is no longer any possibility that the
Decision of the RTC of CDO may conflict with the disposition of the present case because
UNIALLOY's complaint for annulment of contract has already been dismissed with
finality. This Court will, thus, proceed to resolve the merits of the instant case.
The fundamental issue here is whether or not herein petit10ners, together with their co-
defendants Van Der Sluis and Yang, are liable to pay respondent the amounts awarded
by the RTC of Makati City in its June 17, 2003 Decision. 17
The Court rules in the affirmative.
As ruled upon by both the RTC and the CA, UNIALLOY failed to pay its obligations under
the above promissory notes and that herein petitioner Spouses Chua, together with
their co-defendants Van Der Sluis and Yang freely executed a Surety Agreement
whereby they bound themselves jointly and severally with UNIALLOY, to pay the latter's
loan obligations with UCPB. Pertinent portions of the said Surety Agreement are
reproduced hereunder, to wit:
xxxx
ARTICLE I
LIABILITIES OF SURETIES
Section 1.01. The SURETIES, jointly and severally with the PRINCIPAL, hereby
unconditionally and irrevocably guarantee the full and complete payment when due,
whether at stated maturity, by acceleration or otherwise, of all sums payable by the
PRINCIPAL under the Credit Agreement, the Note/s and other related documents or
instruments referred to therein (hereinafter referred to collectively as the "Loan
Documents") the terms and conditions of which are hereby deemed incorporated by
reference.
The liability of the SURETIES shall not be limited to the aggregate principal amount
of FIFTY MILLION PESOS (₱50,000,000.00), Philippine Currency, or its foreign currency
equivalent, but shall include such interest, fees, penalties and other charges due
thereon, as well as any and all renewals, extensions, restructurings or conversions of the
Accommodation or any portion thereof, as may appear in the books and records of
account of the BANK.
Such extension/s, renewal/s, restructuring/s, or conversion/s of the Accommodation or
any portion thereof, including any increase in the principal amount thereof, or the
imposable interest rates and other bank charges, shall be binding upon
the SURETIES under the terms of this SURETY AGREEMENT, without need of any further
notice to or consent or conformity of the SURETIES, all of which are hereby expressly
waived.1âwphi1
Section 1.02. This SURETY AGREEMENT is a guarantee of payment and not merely of
collection and is intended to be a perfect and continuing indemnity in favor of the BANK
for the amounts and to the extent stated above. For this purpose, the SURETIES hereby
commit that for as long as this SURETY AGREEMENT is in effect, the SURETIES shall not
sell, lease, transfer, assign or encumber any of its present and future properties without
the written consent of the BANK, which consent will not be unreasonably withheld.
The liability of the SURETIES shall be absolute, irrevocable, unconditional, direct,
immediate and not contingent upon the pursuit by the BANK of whatever remedies it
may have against the PRINCIPAL or the other sureties for the Accommodation, and shall
be performed by the SURETIES strictly in accordance with the terms hereof and under
any and all circumstances, including the existence of any claim, set-off, defense or other
rights which the SURETIES or any person or entity may have at any time against the
BANK for any reason whatsoever, whether or not related to this SURETY AGREEMENT,
the Loan Documents or under such other documents executed in relation thereto, or
contemplated hereunder.
ARTICLE II
TERM
Section 2.01. This SURETY AGREEMENT shall remain in full force and effect until
payment in full of all amount for which the PRINCIPAL is or may be liable as set forth in
ARTICLE I hereof, regardless of the absence of any further or other assent or conformity
of, or notice to the SURETIES, or any circumstance, or provision of law which might
otherwise constitute a defense or discharge of the SURETIES, all of which are hereby
expressly waived.
ARTICLE III
DEFAULT
Section 3.01. If the BANK shall declare the obligation of the PRINCIPAL to be due and
payable because of the happening of any of the event of default as defined in the Credit
Agreement, the SURETIES, upon receipt of written notice from the BANK, shall
forthwith pay to the BANK the full amount of the said obligations, without need of
demand, protest or notice of any kind, other than the notice provided herein, all of
which are likewise expressly waived by the SURETIES. In this connection, the BANK is
hereby given full power and authority to apply whatever moneys or things of value
belonging to the SURETIES which may be in the possession or control of the BANK in
payment of the obligations mentioned above.
ARTICLE IV
BINDING EFFECT
Section 4.01. This SURETY AGREEMENT shall except upon the other SURETIES, if any
whose liability(ies) is/are extinguished by way of compromise or otherwise be binding
upon the SURETIES, their heirs and successors in interest and shall inure to the benefit
of and be enforceable by the BANK, its assigns and successors in interest. For this
purpose, the SURETIES have agreed, as they hereby agree, that an extinguishment of
liability(ies) of any of the SURETIES shall not be an obstacle to the BANK from
demanding payment from the other SURETIES, if any, so long as the Accommodation
has not been fully collected.
x x x x18
Petitioners do not deny their liability under the abovequoted Surety Agreement. As
correctly held by both the RTC and the CA, Article 1159 of the Civil Code expressly
provides that "[o]bligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith." The RTC as well as the
CA found nothing which would justify or excuse petitioners from non-compliance with
their obligations under the contract they have entered into. Thus, it becomes apparent
that petitioners are merely attempting to evade or, at least, delay the inevitable
performance of their obligation to pay under the Surety Agreement and the subject
promissory notes which were executed in respondent's favor.
The Court notes, however, that the interest rates imposed on the subject promissory
notes were made subject to review and adjustment at the sole discretion and under the
exclusive will of UCPB. Moreover, aside from the Consolidated Statement of Account
attached to the demand letters addressed to petitioner spouses Chua and their co-
defendants,19 no other competent evidence was shown to prove the total amount of
interest due on the above promissory notes. In fact, based on the attached Consolidated
Statement of Account, UCPB has already imposed a 24% interest rate on the total
amount due on respondents' peso obligation for a short period of six months. Settled is
the rule that any contract which appears to be heavily weighed in favor of one of the
parties so as to lead to an unconscionable result is void.19 a Any stipulation regarding the
validity or compliance of the contract which is left solely to the will of one of the parties,
is likewise, invalid.20
Moreover, courts have the authority to strike down or to modify provisions in
promissory notes that grant the lenders unrestrained power to increase interest rates,
penalties and other charges at the latter's sole discretion and without giving prior notice
to and securing the consent of the borrowers.21 This unilateral authority is anathema to
the mutuality of contracts and enable lenders to take undue advantage of
borrowers.22 Although the Usury Law has been effectively repealed, courts may still
reduce iniquitous or unconscionable rates charged for the use of money. 23 Furthermore,
excessive interests, penalties and other charges not revealed in disclosure statements
issued by banks, even if stipulated in the promissory notes, cannot be given effect under
the Truth in Lending Act.24
The Court, thus, finds it proper to modify the interest rates imposed on respondents'
obligation. Pursuant to the ruling in Nacar v. Gallery Frames, et. al.,25 the sums of
US$435,494.44 and PhP26,940,950.80 due to UCPB shall earn interest at the rate of
12% per annum from the date of default, on August, 1, 2001, until June 30, 2013 and
thereafter, at the rate of 6% per annum, from July 1, 2013 until finality of this Decision.
The total amount owing to UCPB as set forth in this Decision shall further earn legal
interest at the rate of 6o/o per annum from its finality until full payment thereof, this
interim period being deemed to be by then an equivalent to a forbearance of
credit.1âwphi1
Finally, pursuant to the parties' Credit Agreement as well as the subject Promissory
Notes, respondents are also liable to pay a penalty charge at the rate of 1 % per month
or 12% per annum.
WHEREFORE, the instant petition is DENIED. The Decision and Resolution of the Court of
Appeals, dated September 21, 2006 and December 11, 2006, respectively, in CA-G.R. CV
No. 81079, are AFFIRMED with MODIFICATION by directing petitioners and their
codefendants to pay respondent UCPB the following:
(1) the principal amounts of US$435,494.44 and PhP26,940,950.80;
(2) legal interest of 12% per annum on the above principal amounts reckoned from
August 1, 2001 until June 30, 2013;
(3) penalty charge of 12% per annum from August 1, 2001 until fully paid; and
(4) an interest of 6% from July 1, 2013 until fully paid.
SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

LUCAS P. BERSAMIN* JOSE CATRAL MENDOZA

Associate Justice Associate Justice

MARVIC M.V.F. LEONEN

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to the Section 13, Article VIII of the Constitution and the Division Chairperson’s
Attestation, I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Court’s
Division.

MARIA LOURDES P.A. SERENO

Chief Justice